Archive for the 'Health Care Costs' Category

Editor’s note: This post is part of a series stemming from theThird Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 30, 2015. The conference brought together leading experts to review major developments in health law over the previous year, and preview what is to come. A full agenda and links to video recordings of the panels are here.

The sale of cigarettes and tobacco products at retailers with pharmacies has received considerable attention over the past year. The national debate reignited in February 2014, when CVS/pharmacy announced that we would quit the sale of cigarettes and tobacco products in our 7,800 pharmacies nationwide. In September 2014, we announced we were officially tobacco free — one month earlier than planned. This was met with kudos from the media, public health officials, and even the President of the United States.

But one question that did not receive anywhere near that level of attention was whether or not our actions would make a difference in the prevalence of smoking and, ultimately, in the public health.

With a new Congress, health care is once again an issue of tremendous scrutiny and debate. Many of the federal policy debates in 2015 will be largely symbolic, resulting in little more than tweaks to existing law.

However, health care policy is not just a matter for Congress to consider. A range of issues will play out in the states and the private sector, effectively shaping the future. Below are the top trends we’re watching this year.

The Year of Living Interoperably

From electronic health records (EHRs) to clinical measures and decision support tools, providers are inundated with new technologies that automate processes and capture new types of data. However, these systems are limited in their potential because they don’t all “talk” to one another. They’re locked away within proprietary technologies that render them the equivalent of an email account that only sends messages to people in your company, or a phone that only makes calls in your house.

On Wednesday, March 4th, the Supreme Court will hear the latest attack on the Affordable Care Act (ACA): the case King v. Burwell. The King petitioners allege that the Internal Revenue Service overstepped its authority by issuing regulations authorizing residents of states with federally run exchanges to access premium tax credits. The petitioners claim that Congress intentionally limited access to premium tax credits to residents of state-based exchanges as a way to encourage states to run their own exchanges.

In support, some state officials claim that they interpreted the law in this manner and that it impacted their state’s decision not to operate a state-run exchange. These assertions, like their analysis of the statutory language, fall flat under any serious scrutiny, however.

Between October 2012 and March 2013, with the support of the Commonwealth Fund, the Center on Health Insurance Reforms (CHIR) conducted a comprehensive review of publicly available information in 50 states pertaining to their decisions to operate either a state or federally run exchange.

The Cadillac high-cost health plan excise tax, which goes into effect in 2018, is one of the last-to-be-implemented provisions of the Affordable Care Act (ACA). It was one of the most controversial provisions of the ACA, which contributed to its delayed effective date. But 2018 is now getting closer, and the Internal Revenue Services (IRS) is beginning a discussion about implementation of the Cadillac plan tax.

The Cadillac plan provision of the ACA will impose a 40 percent excise tax on the cost of employer-sponsored health plans when that cost exceeds certain thresholds. It is projected to be one of the biggest sources of revenue under the ACA; the Congressional Budget Office (CBO) in its 2015 Budget and Economic Outlook Report estimated that it would account for $149 billion in revenue between 2018 and 2225. Of this, however, only one quarter will come from the tax itself, while three quarters will come from increases in taxes on income as employers shift compensation from health benefits to taxable wages.

While the tax will affect few plans initially, it is likely to affect many more plans over time as the cost of health care continues to grow faster than inflation generally. The tax is expected to reduce health care expenditures by individuals, as it will drive employers to increase employee cost sharing as they cut the cost of coverage, and employees are likely to spend less on health care if they have to purchase it out-of-pocket rather than drawing on insurance coverage.

Our goal here, like many before us, is to highlight striking disparities in this dataset (despite its limitations); attempt to understand why they occur; and provide opportunities to address them.We examine three major issues: geographic variation; individual provider variation; and variation across care settings. Finally, we outline recommendations for future data releases to encourage more practical analyses.

Geographic Variation in Practice Patterns

A popular example highlighted by the CMS data was the rate of use of Lucentis — a drug prescribed for patients with age-related macular degeneration (AMD). Although a clinical study demonstrated similar outcomes for Lucentis ($2,000 per dose) versus Avastin ($50 per dose), the CMS data revealed total Lucentis spending of $1 billion.

The American health care system is far and away the most costly in the world. Health care reform is intended to lower costs, but they are still rising, albeit less steeply than in the past. Moderation is not however the case in the area of specialty pharmacy. The medications to treat Hepatitis C are the most cited examples of a general inflationary trend, but the pipeline of expensive medications is extensive.

We believe that resiliency is about to be challenged in a manner unlike we have seen in the past, at least in the area of pharmaceuticals. A number of pharmaceutical manufacturers are developing a new class of medication to manage high cholesterol — the PCSK9 (proprotein convertase subtilisin/kexin 9) enzyme inhibitors.

It is now commonly accepted that to achieve health, the U.S. health system must address the social determinants of health. While the integration of health care with social services and public health is happening relatively infrequently across the country, one bright spot can be found in Oregon, where an innovative Medicaid health system model, referred to as the coordinated care model, is showing early signs of success in bridging the gap between the community and the health care system.

Under Oregon Governor John Kitzhaber’s leadership, newly created coordinated care organizations (CCOs)—partnerships between physical, behavioral, and oral health providers—have over the past two years adopted Oregon’s coordinated care model, which was created as the foundation for Oregon’s health system reform efforts to ensure care is coordinated, performance is measured, positive outcomes are rewarded, and that there is a shared responsibility for health, sustainable rate of growth, and transparency in price and quality—all with the goal of promoting positive health outcomes.

Between 2002 and 2011, US hospitals increased their productivity in treating Medicare patients for several serious illnesses, refuting fears about a “cost disease” in health care and potentially mitigating concerns about provider payment under the Affordable Care Act.

The study, released today by Health Affairs as a Web First, addresses the quality of care and the severity of patient illness (considerations not fully taken into account by previous studies on this topic) found that during those years, the annual rates of productivity growth were 0.78 percent for heart attacks, 0.62 percent for heart failure, and 1.90 percent for pneumonia.

When the authors John Romley, Dana Goldman, and Neeraj Sood calculated productivity growth rates without factoring in trends in the severity of patient conditions or outcomes achieved after hospitalization, the annual productivity rates were different: -0.64 percent for heart attacks, -0.91 percent for heart failure, and -0.39 percent for pneumonia.

The recent February issue of Health Affairs, which features a series of articles on innovation, provides us with an opportunity to examine the state of America’s innovation ecosystem for medical technology. This ecosystem has produced a myriad of medical advances, ranging from advanced imaging to molecular diagnostics, minimally invasive surgical tools, and incredibly sophisticated implants. These technologies have shortened hospital stays, reduced the economic burden of disease, and saved and improved millions of lives.

But the system is severely stressed. Policy improvements are essential if America is to remain a world leader in medical devices and diagnostics and fulfill its potential for medical progress in this century of the life sciences. In the following blog post, we will look at the current state of the medical technology industry and make some policy recommendations covering regulatory approval processes, payment and coverage policies, and tax policy.

Catalyst for Payment Reform (CPR) will spend significant time in 2015 looking at the features payment reform programs must have to be workable for purchasers and sustainable for providers. We look forward to sharing in this space what we learn, as we have done each month for over a year. But this month, we’ll take a slight detour to devote some “ink” to an issue near and dear to our heart—price transparency, a critical building block for payment reform.

Across the board, price transparency tools from vendors and plans are improving, but are the price estimates tools give consumers accurate? Unfortunately, the answer is often no. In general, as we discovered in work with our colleagues from HCI3, many price transparency tools suffer from one or more common methodological flaws. Below, we examine these flaws and their remedies.

Editor’s note: This post is part of a series stemming from theThird Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 30, 2015. The conference brought together leading experts to review major developments in health law over the previous year, and preview what is to come. A full agenda and links to video recordings of the panels are here.

Dame Sally Davies, the Chief Medical Officer of England, warns that we are approaching an antibiotic apocalypse. A former chief economist at Goldman Sachs estimates that unless dramatic action is taken now, antimicrobial resistance could kill 50 million people a year and cause $100 trillion in cumulative economic damages.

But last week, the science press breathlessly celebrated the discovery of a new antibiotic, teixobactin, cultured from soil samples collected in a grassy field in Maine (the study was published in Nature). Crisis over?

Since December 2013, regulatory approval of new treatments for hepatitis C have brought long simmering debates on drug pricing and value to full boil. The drugs—Gilead’s Sovaldi and successor combination treatment Harvoni, AbbVie’s Viekira Pak—represent significant steps forward for treatment in hepatitis C, demonstrating cure rates well above 90 percent in the clinical trial setting as well as greater tolerability for patients.

This unprecedented effectiveness, however, has come at a high cost, with treatment ranging from $63,000 for an eight-week course of Harvoni on the low end to above $150,000 for Sovaldi in combination with other products on the high end. This is likely to be representative of a wave of similar products coming through the drug development pipeline: highly targeted, highly effective, and highly priced.

Also indicative of things to come are the steps some groups are taking to blunt the impact of increased spending on hepatitis C treatments, such as formulary adjustments or prioritized coverage for particular subsets of the hepatitis C patient community. Days after the U.S. Food and Drug Administration (FDA) approved AbbVie’s Viekira Pak in December 2014, for example, the largest pharmacy benefit management company in the United States, Express Scripts, announced that the drug regimen would be the only hepatitis C treatment on its preferred list of covered drugs.

Dennis Kuo and colleagues found that children with medical complexity had higher unmet needs than children without medical complexity. The authors describe medical complexity as “children who require medical services beyond what is typically required by children with special health care needs.”

This inequity holds regardless of race, ethnicity, insurance coverage, and household income in relation to poverty level. In other words, unmet needs remain high even among those who have favorable social determinants of health care. The authors conclude that medical complexity itself may be an independent determinant of health care inequity for children.

We also want to give a delayed shout-out to the nice “shake the winter blahs” Health Wonk Review that Vince Kuraitis published at e-CareManagement on January 15. Vince included a Health Affairs Blog post by Uwe Reinhardt reacting to Jonathan Gruber’s controversial remarks and explaining why Americans aren’t stupid but are often ignorant about policy issues.

In a recent post, we agreed with Goetzel et al. about the advisability of moving away from a preoccupation with the return-on-investment (ROI) of wellness programs and toward the more systemic, iterative view required to make progress toward workplace “cultures of health.”

At the same time, we acknowledged Lewis et al. and others for helping to usher in a new and needed scrutiny of the fairness and effectiveness of employment-basedwellness programs. But, we also cited peer-reviewed evidence that counters Lewis et al.’s conclusion that there are no conditions under which employer wellness programs, and by extension employer efforts to manage their core health-related value/sustainability challenge, can achieve a return-on-investment (ROI) ratio of better than 1-to-1 savings to cost.

Lewis et al. have added their voice to the scrutiny increasingly applied to employer use of outcome-triggered incentives or penalties to promote employee behavior change in the context of health-contingent programs under financial provisions in the Affordable Care Act. The momentum fueling these developments could soon extend far beyond wellness programs.

Editor’s note: This post is part of an ongoing “Exhibit of the Month” series. Readers who’d like to highlight other noteworthy exhibits from the same issue are encouraged to make their pitch in the comments section below.

This month’s exhibit, published in the January issue of Health Affairs, looks at the proportion of hospital charges to and collections from uninsured patients in California from 2003 to 2012.

In the twenty-three states currently not expanding Medicaid under the Affordable Care Act (ACA), uninsured adults who would have been eligible for that program and have incomes at or above poverty are now generally eligible for subsidies to purchase health coverage in their state’s Marketplace exchange. How would out-of-pocket costs in the Marketplace compare with Medicaid coverage for this group of low-income Americans living in states not expanding Medicaid?

This study, being released by Health Affairs as a Web First, estimated these costs under two simulation scenarios: calculating out-of-pocket costs for families covered by a subsidized silver Marketplace plan and comparing that with coverage under Medicaid. Author Steven Hill found that Medicaid would more than halve these adults’ average annual family out-of-pocket spending ($938 versus $1,948).

Many health systems are experiencing shortages of health care workers. Policymakers and practitioners have tried for a long time to figure out how to assess workforce productivity, skills and roles, in order to achieve the best mix of professionals needed to deliver high quality care while preserving sustainability.

Unfortunately, many obstacles have slowed progress toward this goal. Open questions still concern not only how many doctors or nurses are needed in any given system or organization level, but also over what roles and responsibilities fall to different health professionals and specialists.

In this post, I want to focus on the key role economic analysis plays in the Federal Trade Commission (FTC)’s health care enforcement program. I use this lens to look first at how the FTC has become more successful in challenging hospital mergers, and then to rebut the notion that the Affordable Care Act is somehow a “free pass” for health care industry consolidation.

After the federal antitrust agencies successfully challenged a number of hospital mergers in the 1980s and early 1990s,[1] we suffered a string of court losses in the mid- and late-1990s, even in cases involving highly concentrated hospital markets.[2] In 2002, the FTC decided to take a step back and examine the reasons for our losses, and whether our analysis of hospital markets was correct.

We engaged in an in-depth retrospective study, used our authority to collect data from hospitals and insurance companies, and held workshops along with DOJ. (See here, here, here, and here.) Cory Capps of Bates and White, and other economists contributed significantly to our understanding as well. This intense period of reflection led to severalimportantpapers demonstrating that the consummated mergers stemming from the hospital merger challenges we lost—including those involving non-profits—resulted in anticompetitive effects, particularly increased prices. We also determined that our losses were due in part to the courts’ acceptance of faulty economic analysis of geographic and competitive effects. (See here, here, and here.)

By now, the Federal Trade Commission’s (FTC) law enforcement efforts in the health care area are well known. We have successfully challenged several hospital and physician practice mergers in the last few years. We also continue to pursue anticompetitive pharmaceutical patent settlements, following a victory at the Supreme Court in the Actavis case. Speaking of the Court, it is currently reviewing a case we brought against the North Carolina Board of Dental Examiners, alleging that its members conspired to exclude non-dentists from providing teeth whitening services in North Carolina.

Perhaps less publicized are the FTC’s various non-enforcement efforts in health care. Arguably most significant among those is the advocacy that the agency conducts in favor of competition principles before state legislatures and other policymakers. I will discuss our advocacy efforts in the health care space in this post, and then turn to the subject of telemedicine, an area in which FTC competition policy may play a significant role.